Mr. Timothy Griffen is a Managing Director and a Portfolio Manager/Analyst at Lazard Japan Asset Management K.K. and leads the Japanese Equity team in Tokyo. He began working in the investment field in 1986. Prior to joining Lazard in 2005, Mr. Griffen held several positions at Deutsche Trust Bank and Scudder Investments Japan, most recently as Chief Investment Officer. Previously, he was a Partner and Regional Specialist at Draycott Partners. He has a B.A. in Business/East Asian Studies from Wittenberg University, and received an Advance Japanese Language Degree from Waseda University. He also has an M.B.A. in International Finance from the University of South Carolina. Mr. Griffen speaks fluent Japanese.

Please tell us the investment philosophy you have and how you invest.

There are two parts to our investment philosophy: conduct intensive research to identify long-term, structural investment ideas and implement these ideas in a way that seeks to maximize their impact on the portfolio results while minimizing risk in areas where we don’t have a knowledge advantage. As fundamental research forms the basis of our idea generation, most of our time is spent investigating where and how the next great investment opportunity is likely to emerge. This involves frequent meetings with company management, industry experts, online research and ultimately the production of forward looking earnings projections. Once a sufficient pool of investment ideas is identified, incorporating them into a portfolio involves qualitatively assessing the conviction level on each idea, then quantitatively measuring the ideas’ impact on the risk/return profile of the portfolio. A number of real-time, pre-trade simulation tools are utilized to support this part of the process. The end result is a portfolio which wins or loses based on the quality of stock specific ideas, irrespective of the overall market trends.

As there are many investment opportunities in the world, why did you aim at a Japanese investment professional?

My career in this industry began after I graduated from an MBA program at the University of South Carolina. As part of this program I studied in Japan for 1 1/2 years, and learned to speak Japanese. 1986, the year I graduated, also happened to be the year Japan passed the Investment Advisory Law allowing for the establishment of Investment Advisors. It was natural therefore for me to begin my career in Japan. And despite the many ups and downs of the market, I have remained an active investor in Japan throughout this time.

What investment opportunities do you currently find significant?

There are a number of structural trend that Japanese companies are involved in which we find exciting as investment opportunities. The ageing Japanese society and cost pressures associated with providing health care has led to the need for efficiencies to the system. A number of Japanese health care related companies are involved in this process. Game software is a counter cyclical business as they are inexpensive gifts to give during an economic downturn. Telecommunications is interesting for the growth of the fixed line business and build out of FTTH. There are a number of companies intent on emerging as global players in industries not traditionally associated with Japan such as food and beverages. Environmental efficiency is a major trend globally and Japanese companies have world class technology in this area. The netbook is a major new technology that has the potential to revolutionize education in the developing world. These are but a few of the ideas currently being implemented in the portfolio today.

How did you get into this business?

After graduating with an MBA specializing in international finance, a job in the investment business was a natural extension of my skill set. My ability to speak Japanese made it easy for me to start that process in Japan, especially during a time when many firms were looking for financial professionals with language ability.

Please introduce the best book on investment you recommend and review it. (Why do you favorite the book?)

Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay is my favorite book for those wishing to learn about investing. While not entirely a book about investments, it traces the history of how group think can create the conditions for humanity to do extraordinarily stupid things. One such example is the tulip mania which gripped The Netherlands and led to tulip bulbs becoming a commodity worth more than gold! A major part of successful investing involves understand what “the crowd” is thinking at any point in time. This book is a good lesson in how human psychology changes through time as a bubble goes from its initial phase, to its peak, to the inevitable disaster. Perhaps someday I’ll add a few chapters to bring it up to modern day!

Please tell us about media (newspaper, journals and website) you check every day to gather information needed for your investment research.

Nikkei Shimbun and various other Japanese periodicals
Financial Times
News sources via Bloomberg including Toyo Keizai
AP
New York Times
Wall Street Journal
etc.

 

That’s all the questions we have. Thank you very much for your cooperation.

 

Interviewer:
Akane Hashimoto
Managing Director, Investment and Research

 

Photographer:
Wataru Sato

Notes:
This article originally appeared on December 16, 2009. Any views presented in this article are as of such date and are subject to change.
This article and the information provided therein are not a recommendation to purchase or sell any security, nor are they intended to constitute the marketing of, or a solicitation for investment in, any investment product.

 

Tracing its history back to 1848, Lazard has long maintained a pre-eminent position in the world's financial marketplace. Lazard Asset Management LLC, an indirect, wholly owned subsidiary of Lazard Ltd., is known for its global perspective on investing and years of experience with global, regional and domestic portfolios. Lazard Japan Asset Management K.K. (LJAM) is the Tokyo-based investment, client servicing and marketing arm of Lazard Asset Management. Established in 1987, LJAM is regulated by the Financial Services Agency（FSA）.

With more than 250 investment personnel worldwide, we offer investors of all types an array of equity, fixed income, and alternative investment solutions from our network of local offices in eleven different countries. Our team-based approach to portfolio management helps us to serve clients effectively over time, and strong client relationships allow us to understand how to employ our capabilities to our clients' advantage.

Lazard Japanese Equity seeks mid- to long-term capital appreciation by investing in undervalued opportunities in the Japanese equity markets. The investment approach focuses primarily on fundamental, bottom-up stock selection employing a style-neutral absolute-return focused investment strategy. The portfolio typically holds between 45 and 65 securities across the full market capitalization spectrum.

Ultimately the portfolio will reflect the highest conviction ideas coming from the analyst team with the objective of identifying absolute upside potential as the highest active positions, with factor risk controlled through the inclusion of some lower conviction ideas. As bottom-up stock pickers, our main source of added value is stock selection. As such, in addition to being subject to rigorous discussion and debate prior to being included in the portfolio, all investment ideas also go through a quantitative simulation to seek to ensure that stock/industry selection risk remains high while other risk factors are minimized.